Art is displayed throughout the hallways and offices of Bacardi's corporate Gables office. Pictured is a piece made of thousands of bottle caps. Downtown Coral Gables has 4.5 million square feet of office space within minutes from the airport and downtown Miami's financial center. It has become a center for many businesses to locate their offices.
CARL JUSTE
MIAMI HERALD STAFF

Art is displayed throughout the hallways and offices of Bacardi's corporate Gables office. Pictured is a piece made of thousands of bottle caps. Downtown Coral Gables has 4.5 million square feet of office space within minutes from the airport and downtown Miami's financial center. It has become a center for many businesses to locate their offices.
CARL JUSTE
MIAMI HERALD STAFF

An iconic brand, Bacardi finds itself struggling at age 153

As a television ad shows, Bacardi’s is the ultimate story of corporate survival.

The hero strides through the tribulations of the past 153 years, including fires, earthquakes, Prohibition and the Cuban Revolution to reach his goal: a Bacardi Gold on the rocks, poured by a bartender — success in a glass.

“Untameable since 1862,” the ad says. It’s a neat if much-simplified summary of Bacardi Ltd.’s history. The story of how a tiny rum company rooted in Santiago de Cuba has grown into an iconic brand sold in 160 countries.

Bermuda-based Bacardi today is a major player in the world spirits market. It is the world’s largest family-owned liquor producer, with about 6,000 employees and 29 distilling, bottling and manufacturing facilities across 16 countries.

Known through the years for the inspirational designs of its headquarters buildings here and in Bermuda, Bacardi invests heavily to reduce the environmental impact of its distilleries and to promote the use of renewable energy. Philanthropy is part of its corporate fabric: In fiscal year 2014 the company donated $3.3 million to communities where it works around the world, and invested millions more to refurbish the Bacardi Tower and Museum in Miami for the YoungArts foundation. Moreover, Bacardi employees volunteer thousands of hours to work on community projects.

Now, Bacardi’s march through history may have slowed, at least temporarily, as the company faces a new set of economic challenges. The Bermuda-based company did not end 2014 in the highest of spirits.

After seeing strong sales of its rum for decades and, more recently, steady demand for its other premium brands, Bacardi’s sales volume overall fell by almost 2 percent last year, to about 33 million nine-liter cases, according to estimates published in February by Shanken’s Impact Newsletter, a leading source of information on the global spirits industry. Its iconic line of rums, the core of Bacardi’s business, fell by an estimated 4.5 percent to around 18.2 million cases, the newsletter said.

Bacardi does not typically release financial information, but one figure — taken from the company’s Corporate Responsibility report for fiscal year 2014 (which ended March 31, 2014) — indicates that overall sales may be stagnant. In the document, Bacardi said its net sales less excise taxes for fiscal year 2014 were nearly $4.6 billion. This is up only slightly from the last time Bacardi provided public figures to the U.S. Securities and Exchange Commission in fiscal 2008. At that time, during the recession, it reported sales excluding excise taxes of $4.5 billion.

Despite the general slump, some of Bacardi’s 200 plus brands and labels — like Grey Goose, William Lawson’s Scotch and Bombay gin — grew last year. Moreover, Bacardi’s main competitors — Diageo, the world’s largest spirits company, and Pernod Ricard — also saw volumes decline last year. But two other major rivals, Brown-Forman and Beam Suntory — a combination of the company that makes Jim Beam and Japan’s Suntory brewing and distilling group — posted some growth in 2014.

Moreover, Bacardi last week revealed it was laying off about 10 percent of its work force in the United States and Canada to reduce costs, the company’s first such move in recent memory. Bacardi has about 600 employees in North America, out of some 6,000 worldwide.

Asked about the drop in sales, Bacardi, whose North American headquarters are in Coral Gables, didn’t say much. The company replied through its public relations office that it does not discuss figures on its operations or performance.

With respect to the workforce reduction, the company said in a statement that it “regularly adjusts staffing — expand or retract — and business structure to best support our business needs” and “meet the demands of an ever-changing global marketplace.” Most of the cuts are being made in the sales and field marketing divisions, it said.

Aside from its general sales declines, Bacardi also has had six “permanent” CEOs since 2000 (two others were interim CEOs), which has given many observers the impression the company is in an ongoing quest for leadership. (In contrast, publicly traded Diageo has had two CEOs since 2000, and one held the job for 13 years.)

Bacardi often does not directly answer critics. In response to Miami Herald queries about the changes in CEOs, the company’s public relations office referred to a 2014 interview with Facundo Bacardi in Shanken’s Impact Newsletter, where the Bacardi chairman said the elevation of non-family members to executive posts was “the beginning of a long transition away from simply being a family-run company.” Going forward, the company would like CEOs to serve for 10-15 years, he added.

CURRENT CEO

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Michael Dolan was chairman and CEO of IMG Worldwide, a giant international sports, media and entertainment firm before he joined Bacardi’s board in 2009. He was named Bacardi’s permanent CEO in January of this year after serving as interim CEO since May 2014. In a phone interview, Bacardi CEO Dolan talked about some of the company’s goals.

There is a trend toward “premiumization” in the global spirits market, “as more wealth accumulates in North America and the rest of the world, people have more disposable income to spend on entertainment, fashion, spirits and move up the chain,” Dolan said.

Bacardi began acquiring premium brands as far back as 1993, when it took control of the company that makes Martini and Noilly Prat vermouth, later moving on to Grey Goose and other premium names in gin, whisky, tequila and liqueur. In the days after the interview with Dolan, the spirits trade media also reported that Bacardi gained a foothold in the booming premium bourbon market by buying Angel’s Share Brands in Louisville.

Dolan did not wish to talk about sales projections but said Bacardi will “look at where the market is going and keep up with it.”

Innovation is key to ensuring future growth, Dolan said. To attract new customers, Bacardi has acquired new products, added a range of flavored rums and extended its product lines.

MAKING CHANGES

In February, Bacardi announced the first new packaging for its rum in more than a decade. The company redesigned its rum bottles and labels “to cement the extraordinary Bacardi heritage into the hearts and minds of today’s consumer,” said Dmitry Ivanov, Bacardi’s chief marketing officer, thereby combining the contemporary with the “strong heritage feel.”

To meet a challenge to its rum sales, Bacardi introduced its own spiced rum, called Oakheart, in 2011. This was mainly to compete with Diageo’s Captain Morgan spiced rum, which was launched in 1983 and is now in sixth place among the top 100 premium spirit brands. While Captain Morgan’s sales seem to have slowed in 2014, Bacardi lost market share to the Diageo brand over the years as it expanded. Other companies also have introduced spiced rums.

Bacardi also partnered recently with competitor Beam Suntory in the huge Brazilian market. Bacardi agreed to handle sales and distribution of three Beam Suntory products — Teacher’s, Maker’s Mark and Jim Beam — in that South American country.

One expert agreed that innovation is vital to any company in the spirits market but that it is far from easy to achieve. Cezary Wlodarczyk is a veteran spirits executive who was Latin American marketing director for Brown-Forman Beverages Worldwide (which produces Jack Daniel’s, Finlandia vodka, Southern Comfort and Canadian Mist).

“Developing a new, exciting product takes time and investment,” Wlodarczyk said. Chemists in labs are constantly mixing potential new products. “They may develop 1,000 new products a year and maybe 10 percent make to a test stage. Out of them, a few go to trial and one succeeds.” Companies have to be willing to do this constantly to obtain a “wow” product, he said.

As for Bacardi, ​Wlodarczyk said the company is excessively reliant on its history rather than on its brands. “Bacardi’s main product is ‘heritage,’” he said. “Young people 21-30 like mixed drinks, and when they go to a bar, what do they care about heritage? Heritage means ‘old.’”

​Another industry observer echoed that view.

“Bacardi’s entire rum line is at about the same level as it was in 1994,” said Alex Smith, editor-in-chief of the IWSR, a London-based information service that tracks the global wine and spirits industry. “And its flagship brand — Carta Blanca [white rum] — has been in decline in the U.S. They need to find a way to invigorate this brand. It may be a cliché, but young people don’t want to drink what their parents drink.”

Other observers point out, however, that ​Bacardi sells a wide variety of products, including premium aged rums, non-heritage Grey Goose vodka, Dewar’s, Bombay Sapphire gin, Cazadores tequila and others. One former Bacardi executive said that the company has made good decisions in acquiring new premium products and understanding the “premiumization” market. He also praised the firm for its extensive distribution network.

But the former Bacardi employee, who asked not to be identified because he continues to work in the international spirits industry, faulted the company for over-concentrating decision-making among the family shareholders, failing to identify new opportunities (like spiced rum), appointing CEOs who don’t understand spirits marketing, and allowing the exodus of experienced executives from the company to obtain “fresh points of view.”

Currently, Bacardi is producing some of the finest, aged sipping rums on the market, he said, but people aren’t generally aware of them. “Marketing is the big issue.”

“In 1983, Captain Morgan did a full national launch, but Bacardi decided they would stick with white and gold [rums]. They missed out on the entire spiced rum craze. Bacardi saw it coming but didn’t realize what was happening until the captain took a few million cases out of their hide.”

He went on to point out that marketing for the future and innovation are essential. “In this industry, you have to predict today what the next generation will want when they’re 10 years old. This is very hard to do. Volumes have declined today because of decisions made 10 years ago.”

Bacardi has also produced a number of highly professional ads to market its rum products, but it’s an open question as to whether they succeed. Scott D. Hollingsworth, a veteran advertising executive who now is an organizational and HR consultant in Wellington, talked about Bacardi’s focus on “heritage.” He reviewed videos of Bacardi ads and said the “Untameable since 1862” production in particular is not relevant to young consumers because “it’s not central to anyone’s consumption of rum. It doesn’t invite anyone into the [rum drinking] category.”

“The ad really ought to stand for something and support it,” said Hollingsworth, who was president of advertising agency Foote, Cone & Belding (FCB) for Europe and the Middle East and headed FCB in Latin America. “Americans’ knowledge of history is embarrassingly low, and even if they know, it’s irrelevant to the product. It looks like the classic example of the owners [of Bacardi] forcing the old story,” he said.

“Compare this with the Corona beer ad. There’s a chair on the beach and a Corona beer,” he said. “It’s inviting. Put yourself in the scene.”

In defending its “Heritage” ad, a statement from the company said that consumers wanted to know more about the company’s history when Bacardi celebrated its 150th anniversary three years ago. The Untameable ad “is designed to engage millennial males (21-29) who are coming to age in an uncertain, risk-averse world,” the unsigned statement said.

PRESENCE IN STORES

At the retail level, however, Bacardi is always a player at liquor stores visited in South Florida.

“I’m Bacardi’s biggest ambassador,” said Eddie Cruz, owner of four Jensen’s liquor stores in Miami, which sell 6,000 to 7,000 cases of spirits per month.

Flor de Caña (Nicaraguan rum), Bacardi White, Barceló (Dominican Republic) and Zacapa (Guatemala) are the biggest sellers at his stores, Cruz said, as are some of the aged Bacardi products. Even though Bacardi is not his biggest seller, Cruz appreciates the company’s customer service. “Their rep service is wonderful,” he said. “They take care of whatever we need, anytime.”

At Rollo’s Liquor store in Pinecrest, vodka, rum, tequila and Scotch are the biggest sellers, said Siegfried Pirkau, who works at the store. “Typically the young crowd likes flavored rums.”

Samuel Rollo, whose father owns the store, said that he and his friends — in their 20s — always drink Ciroc vodka, “all the flavors.”

“We rarely drink rum” he said. “Most people buy the Bacardi White here, and when kids go to the beach, they pick up Bacardi.”

At a liquor store on 88th Street in Kendall, Captain Morgan is the biggest seller, but people also buy a lot of Bacardi White, the manager said.

And at a Costco in Pompano Beach, Captain Morgan and Bacardi White are the biggest sellers among rums, even though Captain Morgan costs $1.50 more than Bacardi for a 1.75-liter bottle.

WHAT’S AHEAD

What lies ahead for spirits? Alex Smith, of the London-based information service IWSR, foresees difficult times ahead for some players in the industry. The service projects overall global growth in spirits of only 0.8 percent between 2013-2019, compared to a 4.8 percent increase from 2008-2013.

According to the information service, the biggest winners in the 2013-2019 period will be whisky: up 4 percent (compared to a 6.4 percent increase in 2008-2013); tequila, up 2.7 percent (vs. 3 percent); bitters, up 1.9 percent ( vs. 3 percent); and brandy, up 1 percent (an increase of 7.5 percent).

Vodka is only projected to grow by 0.1 percent to 2019 after shrinking by 1.1 percent between 2008-2013.

But Bacardi’s mainstay — rum — is expected to decline by 1.5 percent after growing by 1.7 percent through 2013.

And even as it moves to confront new challenges in the world spirits market, Bacardi recently took innovation in a new direction: fashion. Perhaps taking a cue from other liquor companies, Bacardi named Akiko Maeda as its first vice president of fashion. The new Bacardi executive, the company said, will incorporate Bacardi brands into the fashion world.

Business: The world’s largest privately owned spirits company, Bacardi Ltd. sells more than 200 brands and labels in 160 countries. It has 29 production facilities, including distilleries, bottling and production plants in the United States (Puerto Rico), Scotland, Italy, India, France, Spain, Germany, England, Mexico and other countries. It produces and sells a wide variety of traditional and flavored rums, as well as Grey Goose vodka, Dewar’s blended Scotch whisky, Bombay Sapphire gin, Martini vermouth and sparkling wines, Cazadores blue agave tequila, William Lawson’s Scotch whisky and Eristoff vodka. Bacardi is the world’s top rum producer and its largest market is the U.S.

In 2014, Bacardi sold an estimated 33 million cases of spirits, down from 2013 and 2012, according to one firm that tracks the industry.

Founded: In Santiago de Cuba, 1862. Bacardi’s assets in Cuba were seized by the Castro regime in 1960, but the family continued to operate from the U.S., Mexico, Spain and The Bahamas. Bacardi received no compensation for its lost property in Cuba.

Founder: Don Facundo Bacardí Massó (1814-1886)

World headquarters: Hamilton, Bermuda

Bacardi USA headquarters: 2701 Le Jeune Rd., Coral Gables

Chairman of the Board: Facundo L. Bacardi, the great-great grandson of the company’s founder.

CEO: Michael J. (“Mike”) Dolan

Employees: About 6,000 worldwide

Ownership: The Bacardi family

Financials: The company does not make public its financial results. Sources in the spirits industry estimate annual revenues at more than $5 billion. The last time Bacardi provided public figures to the U.S. Securities and Exchange Commission (fiscal 2008) it reported sales excluding excise taxes of $4.5 billion and net income of $794.7 million.

Website: www.bacardilimited.com and www.bacardi.com

Sources: Bacardi and other sources

Acquisitions: an essential part of Bacardi’s growth strategy

Bacardi today produces and sells more than 200 brands and labels, including a portfolio of its own rum brands, plus vodka, whisky, gin, tequila and other alcohol brands it acquired. To extend its brand line and its market reach, Bacardi either buys a company directly or takes an equity share in a spirits firm.

Here are the additions Bacardi has made to its product line thus far:

1993: Bacardi acquires General Beverage, owner of Martini & Rossi, the Italian producer of the famous Martini vermouth, sparkling wines like Asti Spumante and the French vermouth Noilly Prat. Bacardi says this move doubled its size. It also put Bacardi firmly in the European market.

1998: The company acquires Dewar’s Scotch whisky and the Bombay and Bombay Sapphire gin bands.

2007: The company buys a stake in Leblon Cachaca, a premium spirit made in Brazil.

2008: Bacardi purchases a stake in the parent company of Mexico’s Patrón Tequila.

2013: The company buys St. Germain, a premium French liqueur made from elderflowers.

2014: Bacardi buys a minority share in London-based Compass Box Whisky Co., which makes a variety of blended Scotch whiskies. This news was reported in April 2015 by Shanken News Daily, which covers the spirits industry.

Since 2000, family owned Bacardi Ltd. has had six different “permanent” CEOs and two interim CEOs. (In contrast, publicly traded Diageo, the world’s largest spirits company, has had two CEOs since 2000. Paul Walsh held Diageo’s top executive post from 2000 to 2013.)

Here are Bacardi’s CEOs since 2000 and the years they were in office:

2014-: Michael J. “Mike” Dolan took over as permanent CEO in January 2015. He served as a board member since 2009 and was named interim CEO in May 2014. Dolan previously was chairman and CEO of IMG Worldwide, a global sports, media and events company.

2012-2014: Edward Shirley previously served as vice chairman of global beauty and grooming at Procter & Gamble. The media reported that Shirley was retiring after two years on the job.

2008-2012: Seamus E. McBride came from Colgate-Palmolive, where he was president of Colgate-US and of Worldwide Commercial Effectiveness at Colgate-Palmolive. According to the WSJ, Bacardi said McBride was retiring.

2005-2008: Andreas Gembler previously was chairman of Bertolucci Watch Manufacturing, and before that, president and CEO of Phillip Morris International. He was appointed to Bacardi’s board in 2003. In an article, The Miami Herald reported that Gembler planned to retire.

2004-2005: Rubén Rodríguez, Bacardi’s chairman, served as interim CEO while the company searched for the permanent CEO.

2003-2004: Javier Ferrán had been with Bacardi for 18 years. Reportedly he left for personal/family reasons.

2000-2003: Rubén Rodríguez was elected president, CEO and chairman of the board in 2000. He left the CEO post in 2003 but remained chairman. Rodriguez joined Bacardi in 1988 and previously was an executive at Chesebrough-Ponds and Bristol Myers. According to a Bacardi press release, he was chairman from 2000 until 2005, when Facundo L. Bacardi was elected chairman.

Sources: Bacardi news releases, the SEC and media reports

Top premium spirits brands

These are the top brands worldwide by estimated 2014 volume sales and company (from list of 100)

Source: The IWSR (originally the International Wine and Spirits Record)

Sales of premium spirits

These figures from the “Top 100 premium spirits brands worldwide by company” reflect sales in millions of nine-liter cases (figures are rounded):

Company

No. of top 100 brands

2011

2012

2013

2014 (est.)

Change 2013-’14

Diageo

14

87.7

91.2

91

89.2

-2 %

Pernod Ricard

19

60.3

57.1

59.4

58.6

-1.4%

Bacardi

6

33.6

34

33.6

33

-2%

Brown-Forman

6

18.9

19.6

20.5

20.6

+.4%

Beam Suntory

7

17.5

18.8

20

20.3

+1.6%

Source: Shanken’s Impact Newsletter, February 2015

Pictured is a full size bar used for social occasions at Bacardi's corporate offices in Coral Gables. Downtown Coral Gables has 4.5 million square feet of office space within minutes from the airport and downtown Miami's financial center. It has become a center for many businesses to locate their offices.
CARL JUSTE
MIAMI HERALD STAFF

Frederick “Rick” Wilson III, senior vice president for Bacardi-Martini, Inc., is photographed inside the lobby of Bacardi's Coral Gables office. Downtown Coral Gables has 4.5 million square feet of office space within minutes from the airport and downtown Miami's financial center. It has become a center for many businesses to locate their offices.
CARL JUSTE
MIAMI HERALD STAFF

Eddie Cruz, is the owner of four Jensen’s liquor stores in Miami. Cruz holds up bottles of Bacardi rum in front of a large wall of rum and other liquor at his store at 1516 NW 27th Ave in Miami on Thursday, April 9, 2015.
Emily Michot
Miami Herald Staff